The latest Boeing and aerospace news, including updates about the Boeing 787 Dreamliner, 747-8 and 737, Airbus A380 and A350, the anticipated Boeing 797 and Boeing jobs and layoffs

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UPDATED: American Airlines to order 42 787s

American Airlines has joined fellow U.S. legacy carriers Northwest and Continental in placing orders for the 787 Dreamliner, even though the plane is way behind schedule.

American announced today it is ordering 42 787-9s and has purchase rights for 58 more.

The order is contingent on American reaching an agreement with its pilots, the airline said.

I’ll have my own story later.

UPDATE: My story follows, along with the American news release.

BY James Wallace
P-I aerospace reporter

Assuming it can agree on a pay rate for the pilots who fly it, American Airlines plans to buy up to a hundred 787 Dreamliners from The Boeing Co. in a deal that would be worth more than $16 billion at the jet’s listed price.

The airline said 42 of the orders are firm. It also has purchase rights for the remaining 58, which means American can lock in a delivery position for those jets at an agreed price.

It represents a huge shot of good news for Boeing at a time when the company has shut down its jetliner production because of a 40-day strike. Boeing has also seen the record-setting pace of 787 orders slow in recent months. The American announcement also is an endorsement for a plane and a program that has been beset with various production-related delays. Before the ongoing Machinists strike, the 787 had fallen at least 14 months behind schedule, with first flight having been delayed from late August of last year to the fourth quarter of this year, and first deliveries pushed back from May of this year to the third quarter of 2009.

The strike by the Machinists union has likely pushed first flight into early 2009, and could also further delay deliveries. Boeing is expected to discuss the strike’s impact on the 787 next week when it reports third-quarter earnings.

American joins Continental and Northwest as the only U.S. airlines so far to order the fuel-efficient 787. Worldwide, Boeing has 895 firm orders from 57 customers.

“We are going to need a modern, fuel-efficient fleet to compete and win in the years to come, which is why we have accelerated our fleet renewal program,” American Chairman and Chief Executive Gerald Arpey said an e-mail to airline employees.

But the purchase agreement between Boeing and American for the 787s contains a provision that allows the airline to not take some or all of the 42 planes if it has not reached what American called a “satisfactory agreement” with its pilots union, the Allied Pilots Association, over pay rates to operate the 787, as well as on other issues.

American said it must notify Boeing at least 18 months before the September 2012 delivery date if it wants to go ahead with the 787 orders.

In a statement, the airline said it expects to reach an agreement with the pilots union before the first notification date.

Typically, an airline has pay rates for each type of plane in its fleet. Pilots who fly the biggest and heaviest planes are paid the most. But because the 787 represents so much new technology – it is the first large commercial jet with a composite airframe – pilots may argue they should be paid more to fly it than the bigger 777, which American also operates.

Two years ago, American could not reach an agreement over how much pilots should be paid to operate the 777 on a long-haul route to Beijing from Dallas that American had been awarded by the Transportation Department. United Airlines was subsequently awarded the coveted route to China, from Washington, D.C.

This strategy of linking a 787 order to a deal with pilots has been used effectively before.

Air Canada announced in early 2005 that it would buy the 787 on condition it could reach an agreement with its pilots over 787 pay rates. When talks between the pilots and Air Canada failed to produce an agreement, the airline said it was backing out of the 787 deal. But the dispute with its pilots was resolved later in 2005 and Air Canada now has firm orders for 37 Dreamliners.

Continental, which has 25 Dreamliners on firm order, also linked the initial orders of the plane to labor agreements. Continental said in late 2004 that it reached agreement with Boeing to buy the 787, on condition the unions agreed to help it cut annual costs by about $500 million.

American has been talking with Boeing for several years about a possible 787 order and as a result will be able to get early delivery positions. Most customers that place orders today for the plane would have to wait until late in the next decade for an available production slot.

Boeing said it will not list the American 787s as a firm order until the airline goes ahead with the deal once it has reached an agreement with its pilpts.

This year, Boeing has won orders for 78 Dreamliners. Sales have slowed in part because most airlines can’t get earlier delivery slots.

But American said it will take its first 787s starting in 2012 and continuing until 2018. Any jets taken with the purchase rights could be scheduled for delivery from 2015 to 2020, the airline said in a statement.

Fort Worth, Texas-based American wants the 787-9 initially, which is a stretched version of the 787-8 that is being developed first. Because of the program delays, entry into service for the 787-9 has been pushed back into 2012, according to Boeing. That means American will be one of the first customers for that model.

Northwest, which has ordered 18 of the smaller 787-8s, will be the first U.S. airline to take delivery of a Dreamliner.

A 42-plane order from American would be among the bigger ones that Boeing has received for the 787. The biggest 787 customer is International Lease Finance Corp., which has firm orders for 74 Dreamliners and has talked with Boeing about making it an even 100.

Qantas is the next biggest 787 customer with 64 firm orders. The 787 launch customer, All Nippon Airways of Japan, has ordered 50 planes.

American is one of Boeing’s most loyal and important customers.

In the 1990s, American, Delta and Continental airlines all signed exclusive 20-year deals with Boeing to buy its commercial jetliners. Just weeks before Boeing announced its proposed merger with McDonnell Douglas in December 1996, American placed what remains a record order with Boeing for 630 jets, including 527 options, for delivery over 20 years. Those exclusive contracts between Boeing and the three airlines had to be reworked in 1997 before the European Union would sign off on the merger between Boeing and McDonnell Douglas. The Europeans wanted Airbus to have the same opportunity as Boeing to sell its planes to any U.S. airline.

The old contract with Boeing still allows American to get planes from Boeing on fairly short notice.

So far this year, American has ordered 36 Boeing 737s.

The airline said Wednesday it has obtained new financing for 20 previously ordered 737s for delivery in 2009. The 737s are replacing American’s large fleet of older, gas-guzzling MD-80s. The airline had previously announced it would take delivery of 76 of the Boeing single-aisle planes in 2009 and 2010.

American News Release:

FORT WORTH, Texas — American Airlines,
Inc., a wholly-owned subsidiary of AMR Corporation announced
today that it has entered into a purchase agreement with Boeing (NYSE: BA)
under which American intends to acquire an initial 42 Boeing 787-9
Dreamliners scheduled for delivery beginning in 2012 and ending in 2018,
with the right to purchase up to 58 additional 787s that may be scheduled
for delivery beginning in 2015 and ending in 2020.

The purchase of the initial 42 787-9 aircraft is subject to certain contingency provisions, as
more fully described below.

AMR Chairman and CEO Gerard Arpey said the agreement to purchase 787
Dreamliners is the latest example of the Company’s efforts to build a
successful, competitive airline for the long-term while continuing to work
to overcome the many immediate challenges facing the entire airline
industry.

Arpey said the agreement would support American’s wide-body replacement
efforts as well as the international growth that is expected after
American, British Airways, and Iberia achieve antitrust immunity and
implement a joint business agreement for flights between North America and
Europe. The airlines have an application for antitrust immunity pending
with the U.S. Department of Transportation. (For more information about
American’s application for antitrust immunity, visit
http://www.moretravelchoices.com.)

“Even as we battle the challenges of volatile and historically high
fuel prices and serious economic uncertainty, we must continue to prudently
invest in our Company for the long-term benefit of our shareholders,
customers, employees and the communities we serve,” Arpey said.

“The 787 will help reduce our fuel and maintenance costs, lessen our environmental
impact, and support our goal of providing industry-leading products and
services over the long haul. Fortunately, our agreement with Boeing, our
long-time partner, allows for significant flexibility to manage our fleet
replacement and growth plans in the way that best meets all of our
stakeholders’ interests.”

“American has been a valued and enduring Boeing partner for many years.
Its selection of the Boeing 787 Dreamliner for fleet replacement and
renewal represents strong validation of the 787’s advanced technology and
superior operating economics, especially in light of high fuel prices and
the need for more environmentally progressive airplanes,” said Ray Conner,
Vice President Sales, Boeing Commercial Airplanes.

According to Boeing, the technologically advanced 787 will use 20
percent less fuel than today’s airplanes of comparable size, provide
airlines with up to 45 percent more cargo revenue capacity, and present
passengers with innovations including a new interior environment with
enhanced air filtration, larger windows, more stowage space, improved
lighting, and other passenger-preferred conveniences. To date, Boeing says
it has received nearly 900 orders for the 787 Dreamliner from more than 55
customers worldwide.

The 787-9 is designed to carry up to 290 passengers. With a range
capability of up to 8,500 nautical miles, it is expected that the 787-9
could operate on every route American serves today, while offering
potential to support new routes if business conditions warrant. American
has yet to decide on a specific cabin configuration or engine type for its
787s and is in the process of determining the specific wide-body aircraft
in its fleet that the 787 would replace.

American announced previously that it will take delivery of 76
more-fuel-efficient Boeing 737-800 aircraft in 2009 and 2010 as it replaces
its narrow-body MD-80 fleet.

American also has undertaken multiple initiatives over the past several
years to enhance its existing fleet with improved cabin interiors, onboard
services and passenger amenities. These efforts have included installing
new premium class seating, with the next-generation Business Class seats
introduced for the 767-300 and 777. In addition, American added two new
First Class seats to the 777 and standardized the fleet in 2007 and 2008
with the addition of Flagship Suite seats for those flying transpacific
routes.

American enhanced inflight entertainment with the current trial for
Gogo(R) inflight broadband Internet service, available on the 767-200.
American also installed new LCD monitors, digital entertainment equipment
for Coach passengers and personal entertainment devices for First and
Business Class customers on the 767-300, 767-200 and 777 aircraft. American
continues to invest in its food and beverage products with the launch of
its menu variety program for First and Business Class customers and new
buy-on-board options.

The 787 purchase agreement contains provisions that would allow
American to choose not to acquire some or all of the 42 initial 787s if it
has not reached a satisfactory agreement with its pilots union to operate
the aircraft. American must notify Boeing of its intent to purchase a 787
at least 18 months prior to its scheduled delivery date, with the first
scheduled delivery date occurring in September 2012.

While there can be no assurances, American expects to have reached such
an agreement with its pilots union prior to the first notification date.

Note: This is a seattlepi.com reader blog. It is not written or edited by the P-I. The authors are solely responsible for content. E-mail us at newmedia@seattlepi.com if you consider a post inappropriate..